Chapter 06 · Section 6.1
Loss Potential
Market Outlook : VOLATILE
Profit Potential : practically
unlimited
Loss Potential:
Breakeven Point :
The investor's potential loss is:
a) unlimited.
b) limited.
An option buyer, call or put, pays a premium for the right to choose whether to buy or sell the underlying asset at the exercise price. The worst scenario is that the options expire worthless and the net premiums paid are lost.